Using data we have already collected and using econometric and microsimulation strategies, we aim to investigate a number of hypotheses relevant to the assertion that mental health services providers are able to create a demand for their own services. The results from this investigation will not only address the validity of the supplier-induced demand or target income hypotheses, but they will also help to clarify the nature of economic markets for mental health services in general. We aim to obtain results by further refining and then testing three interrelated econometric models described in the body of this proposal. The first model predicts a patient's length of treatment and uses individual patient data. The second model uses individual provider data to predict various consequences of provider interaction. This second model predicts the providers' total number of patients in treatment, on a waiting list, and referred elsewhere; the providers' income; and the providers' fees. The third model combines the previous two models in a microsimulation of the mental health services market system. The major hypotheses to be examined and their relationship to our proposed microsimulation are stated in the body of the proposal. The three models proposed provide a means for gaining new insights into certain problems confronting mental health service delivery. For example, to the extent that providers can influence demand, public policy objectives concerning geographic distribution of providers are compromised, and this analysis will provide some indication of the seriousness of this problem. Our models will also permit forecasts about the consequences of alternative financing systems (such as those based on diagnosis related groups). The results from this project should have considerable influence on the design of future microdata collection efforts and associated demand studies in mental health, as well as upon the design of effective public policy regarding mental health care.